‘Foreign-Aided’ Party and Prohibited Funds

‘Foreign-Aided’ Party and Prohibited Funds 

“Other than reasonable restrictions in the interest of the sovereignty or integrity of Pakistan, any other restriction that abridges or in any manner impairs the free functioning of a political party or restricts the access of party leaders and members of the political party from reaching the electorate is a flagrant disregard of the cluster of fundamental rights that go to the core of a robust and working constitutional democracy.”

(Mansoor Sarwar Khan v Election Commission of Pakistan 2015 CLC 1477)

Is Pakistan Tehreek-e-Insaf (PTI) a ‘foreign-aided party’? What is the legal connotation and definition of a foreign-aided party? Who has the authority to declare any political party as ‘foreign-aided’? While every citizen of Pakistan has an inalienable fundamental right to form or be a member of a political party, it is also necessary for a political party under Article 17(3) of the Constitution of Pakistan  to account for “the source of its funds in accordance with law”. The law (Political Parties Order 2002) relating to formation and functioning of political parties, promulgated by a military dictator and never challenged or reviewed by our champions of democracy sitting in the Parliament, imposes a number of restrictions on forming and functioning of political parties—many of which may not stand the test of Article 17 and other provisions of the supreme law of the land. However, in this paper we will only highlight the questions relating to seeking funds and filing of accounts by political parties as well as what ‘prohibited contributions’ are. What are the consequences of taking such funds? These questions need to be debated publicly, within the parameters of relevant laws. People want to know what kind of penal action(s) can be taken against any ‘foreign-aided political party’.

The expression “foreign-aided political party” is exhaustively defined in Article 2(c) of Political Parties Order 2002 as a political party which:

• has been formed or organised at the instance of any government or political party of a foreign country; or
• is affiliated to or associated with any government or political party of a foreign country; or
• receives any aid, financial or otherwise, from any government or political party of a foreign country, or any portion of its funds from foreign nationals.

As evident from a plain reading of Article 2(c)(iii) of PPO 2002, mere receipt of any portion of funds from foreign nationals also renders a political party “foreign-aided”.

In a case filed by Muhammad Hanif Abbasi against Imran Khan Niazi (Constitution Petition 35 of 2016) in the Supreme Court of Pakistan, one issue raised for disqualification is alleged receipt of funds from foreign entities and foreign nationals and non-disclosure of the same by the PTI leader before the Election Commission of Pakistan (ECP) in annual accounts filed under the law.

On May 8, 2016, the five-member bench of ECP unanimously passed a short order, rejecting PTI’s challenge to its jurisdiction in a foreign funding case filed by an ex-member of PTI, Akbar S. Babar, in November 2014. In its short order, the bench also ordered PTI to produce all the financial records for which injunctions were passed on April 1, 2015, December 1, 2016, and May 17, 2017. The petitioner in this case had claimed that “almost US$ 3 million of illegal foreign funds were received by PTI”. The petitioner further alleged that “these funds were collected through two offshore companies registered under Imran Khan’s signatures and that money was received through hundi from the Middle East as well as foreign accounts used to collect funds were concealed from the annual audit.” All of PTI’s attempts to challenge the petition on technical grounds, including contesting the jurisdiction of ECP, had failed—for this purpose the writ petition filed in Islamabad High Court proved fruitless. In the meantime, the same grounds that Akbar S. Babar took before the ECP were taken verbatim by Hanif Abbasi in the Supreme Court in Constitution Petition No. 35 of 2016 filed under Article 184(3) of the Constitution.

On May 10, 2017, according to a press report, PTI’s counsel “came under fire” in the Supreme Court for “inadequate arguments” to justify “the party’s source for acquiring funds amounting to millions of dollars from the US between 2010 and 2013”. A three-member bench of the Supreme Court, headed by the Chief Justice of Pakistan, while referring to the April 20 decision of the top court in the Panamagate case whereby a Joint Investigation Team (JIT) was formed to probe offshore businesses of the Sharif family, remarked that the foreign funding matter could similarly be referred to the ECP to determine whether the funds were acquired through prohibited sources. Earlier, the counsel for the petitioner, Mr. Akram Sheikh, argued that between 2010 and 2013, “PTI received $2.3 million through foreign funding.” He said, “This was prohibited under the Political Parties Order 2002 and Article 17 of the Constitution.” Mr. Akram Sheikh argued that many donors/financiers/contributors were foreign nationals—he also submitted a list such contributors before the bench.

The defence of Mr. Anwar Mansoor Khan, counsel for Imran Khan, was that the issue of foreign funding was a “past and closed transaction” as ECP had accepted the annual accounts. Mr. Anwar Mansoor while admitting that foreign nationals contributed to the party stated that there was a difference between foreign funding and contribution. He claimed that all the “contributions” were unconditional and could not be called “foreign aid” that could have been “conditional”. According to Mr. Anwar Mansoor Khan, the maximum penalty for foreign funding was confiscation of such funds by ECP. He contested that merely receiving “contributions” or donations from abroad did not render a party as a “foreign-aided party” under PPO Order 2002.

On May 11, 2017, while continuing his arguments, Mr. Anwar Mansoor further elaborated that Articles 2 and 3 were different from Article 6 of PPO 2002. He also recorded this statement before the court: “According to my interpretation, Article 6(2) of PPO 2002 relates to money received in Pakistan domestically except for the money received from foreign government, which is distinct from Articles 2, 3 and 15 of PPO 2002 read with Article 17(2) of Constitution of Pakistan”. He said that, “The penalty and jurisdiction provided in both are different and distinct and do not overlap”. He further argued that, “The allegations levelled in the petition are regarding foreign funding, which according to me, is not the domain of the Election Commission.” The bench without expressing any views on the arguments advanced by Mr. Anwar Mansoor Khan granted him time to consult his client and submit the reply at the next hearing—May 23, 2017.

The arguments and references of PPO 2002 and Political Parties Rules (PPR) 2002  made by Mr. Anwar Mansoor Khan require a thorough examination and in-depth analysis. Rule 6 of PPR 2002 clearly says that “where the Election Commission decides that the contributions or donations, as the case may be, accepted by the political parties are prohibited under clause (3) of Article 6, it shall, subject to notice to the political party concerned and after giving an opportunity of being heard, direct the same to be confiscated in favour of the State to be deposited in Government Treasury….”

(Note: The language of Rule 6 of PPR 2002 is explicitly clear that the ECP has full power to probe whether contribution or donation by any political party is prohibited under Article 6(3) of PPO 2002 and if it is so established, the same can be confiscated in favour of the state).

 Articles 6(3) and (4) of PPO 2002 read as under:

“(3) Any contribution made, directly or indirectly, by any foreign government, multinational or domestically incorporated public or private company, firm, trade or professional association shall be prohibited and the parties may accept contributions and donations only from individuals.”

(4) Any contribution or donation which is prohibited under this Order shall be confiscated in favour of the State in the manner as may be prescribed.

Explanation – For the purpose of this section, a “contribution or donation” includes a contribution or donation made in cash, kind, stocks, hospitality, accommodation, transport, fuel and provision of other such facilities.”

(Note: Plain reading of Articles 6(3) and (4) confirms that there is a complete bar on a political party to accept contributions or donations from any foreign government, multinational or domestically incorporated public or private company, firm, trade or professional association but parties may accept contributions and donations only from individuals. Obviously, individuals may be foreign nationals. Articles 6(3) and 6(4) when read in conjunction with Article 2(c)(iii) of PPO 2002 establish beyond any doubt that receiving of money as contributions or donations from foreign national may render a political party as a ‘foreign-aided’ party but the amounts ipso facto are not prohibited contributions. This is a vital legal distinction and cannot be ignored).

Article 3(4)(f) of PPO 2002 clearly says that a political party shall not be formed, organised, set up or convened as a ‘foreign-aided political party’. It is a cardinal principle of interpretation of statutes that any enactment shall be read as a whole. The provisions of PPO 2002 and PPR 2002 should be read in harmony to determine the consequences of receiving prohibited funds and where no violation of Article 6(3) is made but the party is covered under Article 2(c)(iii) of PPO 2002 as ‘foreign-aided’.

Article 13 of PPO 2002 is very vital from the angle of determination of sources of any political party. It reads as follows:

Information about the sources of party’s fund – (1) Every political party shall, in such manner and in such form as may be prescribed or specified by the Chief Election Commissioner, submit to the Election Commission, within sixty days from the close of each financial year, a consolidated statement of accounts of the party audited by a Chartered Accountant containing-

• annual income and expenses;
• sources of its funds; and
• assets and liabilities.

(2) The statement referred to in clause (1), shall be accompanied by a certificate signed by the party leader stating that-

• no funds from any source prohibited under this Order were received by the party, and
• the statement contains an accurate financial position of the party.

(Note: The allegation in a petition filed by Hanif Abbasi in Supreme Court is that Imran Khan as a party leader of PTI misstated before the ECP that no funds from any source prohibited under PPO 2002 were received. Interestingly, the fact of receipt of funds from foreign nationals have been admitted by his counsel in the Supreme Court on May 10, 2017, and a list of such persons has also been provided by the counsel for Hanif Abbasi but nobody has mentioned that taking funds from individuals, even foreign nationals, is not prohibited under Article 6(3) of PPO 2001!).

Rule 4 of the Political Parties Rules 2002 says:

“Every political party shall maintain its accounts in the manner set-out in Form-I indicating its income and expenditure, sources of funds, assets and liabilities and shall, within sixty days from the close of each financial year (July-June), submit to ECP a consolidated statement of accounts of the party audited by a chartered accountant, accompanied by a certificate, duly signed by the party leader to the effect that no funds from any source prohibited under the Order were received by the party and that the statement contains an accurate financial position of the party.”

All of the above-cited provisions of PPO 2002 and PPR 2002 when read together clearly establish that ECP has jurisdiction under Rule 6 of Political Parties Rules 2002 to probe into the matter of foreign funding and take cognizance in case of any prohibited contributions/donations/aid and order confiscation. However, it has no authority beyond this. The legal responsibility/obligation of taking action for dissolution of such a party rests with the federal government which is elaborated in Article 15 of PPO 2002 as under:

“Dissolution of a political party.- (1) Where the Federal Government is satisfied that a political party is a foreign-aided party or has been formed or is operating in a manner prejudicial to the sovereignty or integrity of Pakistan or is indulging in terrorism, it shall make such declaration by a notification in the official Gazette.

(2) Within fifteen days of making a declaration under clause (1), the Federal Government shall refer the matter to the Supreme Court whose decision on such reference shall be final.

(3) Where the Supreme Court upholds the declaration made against a political party under clause (1), such party shall stand dissolved forthwith.”

The provisions of PPO 2002 and PPR 2002 are unambiguous—once the federal government has valid proof that a political party is a ‘foreign-aided party’ within the ambit of Article 2(c) of PPO 2002, it is duty-bound to make such a declaration by notification in the official Gazette. In the case of PTI, the federal government has not taken any action under section 15 of PPO 2002. It is obviously not the jurisdiction of ECP. The ECP can only retrieve prohibited funds and order their deposit in favour of the state into the Government Treasury or Sub-Treasury under the head of the accounts: “3000000-Deposits and Reserves-B-Not Bearing interest, 3500000-Departmental and Judicial Deposits, 3501000-Civil Deposits, 3501010-Deposits in connection with Elections”—see Rule 6 of Political Parties Rule 2002 notified through S.R.O. 456(I)/2002 dated July 23, 2002 in exercise of powers under Article 19 of PPO 2002. If PTI took only funds from individuals, including foreign nationals, then there was no infraction of law as was clear from a plain reading of Article 6(3) of PPO 2002 and elaborated in detail above.

 

The writers are lawyers and partners in Huzaima & Ikram and are part of the Adjunct Faculty at Lahore University of Management Sciences (LUMS).

The views expressed in this article are those of the authors and do not necessarily represent the views of CourtingTheLaw.com or any organisation with which they might be associated.